Action brought on 3 December 2015 — Republic of Austria v Federal Republic of Germany

(Case C-648/15)

Language of the case: German

Parties

Applicant: Republic of Austria (represented by: C. Pesendorfer, acting as Agent)

Defendant: Federal Republic of Germany

Form of order sought

Action under Article 25(5) of the Convention concluded between the Republic of Austria and the Federal Republic of Germany concerning the avoidance of double taxation with respect to taxes on income and capital (öBGBl III 182/2002, dBGBl II 2002, 735, and dBStBl I 2002, 584) (‘the German-Austrian Double Taxation Convention’), read in conjunction with Article 273 TFEU, concerning discrepancies between the Republic of Austria and the Federal Republic of Germany in their views on the interpretation and application of Article 11 of that Convention.

The applicant claims that the Court should:

hold that income from the profit-participation certificates (Genussscheine) at issue in this case is not to be characterised as ‘profit participation claims’ within the meaning of Article 11(2) of the German-Austrian Double Taxation Convention. Consequently, under Article 11(1) of that Convention, Austria, as the State of the seat of Bank Austria, has the exclusive right to tax the income from such certificates;

order the Federal Republic of Germany to refrain from taxing Bank Austria’s income from the certificates at issue and to reimburse the taxes already levied on that income;

order the Federal Republic of Germany to pay the costs.

Pleas in law and main arguments

The Republic of Austria objects to the Federal Republic of Germany characterising the income at issue as interest with a ‘profit participation’ element within the meaning of Article 11(2) of the German-Austrian Double Taxation Convention. While the return is generally calculated according to a fixed percentage, it is, in the view of the Federal Republic of Germany, profit-dependent in being subject to a condition that there is an adequate amount of profit.

Contrary to the position of the Federal Republic of Germany, the Republic of Austria takes the view that the certificates at issue confer solely an entitlement to interest calculated on the basis of a fixed percentage of the nominal value. This interpretation is, first of all, consistent with the meaning in everyday usage; it is also confirmed by a comparison with the financial instruments referred to, by way of example, in Article 11(2) of the German-Austrian Double Taxation Convention.

In the present case, according to the Republic of Austria, the creditor accordingly merely grants the debtor an additional time for payment, since particularly during its lifespan a profit-participation certificate affords a right to defer payment to a later time. In effect, such certificates therefore correspond to fixed-interest negotiable instruments to which a certain risk of loss is attached.

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